Conscious Capitalism: Can Empathy Change The World?

In the late 19th century, a concept called the Progressive Movement crept through the vineworks of American business thinking. While there were many aspects of Progressivism–including cleaning up local government, one of the more high-minded Progressive theories worked like this: A working factory would be drop-shipped onto an agrarian community and provide prosperity for a local populace surrounded by the natural wonders of clean air and water.

This was a utopian ideal that contrasted with the smudgy skies and open sewage of the contemporary 1800s urbanscape. To superimpose Industrial progress over Agrarian rural communities seemed fantastical, yet businessmen like Henry Ford latched onto the ideals of the Progressive Movement, and moved his fledgling automobile company to Dearborn. Similar Progressive communities sprouted in the pastoral area of Kohler, Wisconsin, where brick manufacturing evolved into today’s Kohler plumbing products. The Amana Colonies in Amana, Iowa are also attributed in part to the Progressive Movement.

Every so often, the men and women who aspire to construct corporate empires need something to live for: an ideal higher than healthy profits.

The latest quest for new consciousness seems to be happening now. In October, the 6th Annual Conscious Capitalism Institute CEO Summit will be held outside of Austin, Texas. In tandem, John Mackey, chief executive officer of Whole Foods, is co-authoring a book titled Conscious Capitalism with Raj Sisodia (Mackey is also a founder of the Institute).

Speakers include Tony Hsieh of Zappos.com, restaurateur Danny Meyer, Kip Tindell of The Container Store, and others that make up a long list of dot orgs, corporations, individuals and communities who are embracing the new consciousness.

The entire staff of GOOD magazine recently left their posts to form a new magazine called Tomorrow that will focus on what’s new and, most of all, what’s good. It can be argued that green initiatives, diversity, sustainability, and other people-friendly moves might all fall under the umbrella philosophies of conscious capitalism.

“Conscious capitalism is an idea, an orientation, and an approach to business,” acknowledges Jeff Klein, a trustee in Conscious Capitalism, Inc. “And it’s an organization.”

Conscious Capitalism, Inc. started as an organization in August, 2006, and focuses principally on enterprise and the recognition that every business has a purpose beyond the firm.

“Rather than seeing business as a tube [money in, money out],” says Klein, “we look at business as an ecosystem of interdependent interrelated stakeholders. For stakeholder management, the business has to produce profits over time, but that doesn’t mean that’s its sole purpose. For the business to be sustainable, flourish, and be resilient, it needs to focus on the whole rather than its parts.”

Klein points out that corporations have often serviced the societies in which they flourish. Companies like Avon and Johnson & Johnson articulated their primary purpose in their original charters, which was not about making money, but serving their stakeholders. The robber barons also recognized that making money and giving portions of it back was an important part of business (Carnegie built libraries, Rockefeller created museums).

What defines companies like Patagonia, Motley Fool, Whole Foods, The Container Store and others as prime examples of conscious capitalism?

Klein explains, “Their leadership lives the conscious capitalism model and they’ve been living it for a long time. It’s a part of their culture—it is their culture. They live it every day. You are alive because you continue to grow and develop better ways of understanding what it means.”

Former economics professor and Nobel Peace Prize recipient Muhammad Yunus was reportedly the first to use the term ‘conscious capitalism’. But are you a conscious capitalist from the beginning, or do you become one? It’s not always a straight line.

“The answer is, many start out this way anyway,” explains Klein. “Many younger entrepreneurs think this way anyway. Some simply are conscious capitalists. Some are unconscious conscious capitalists. And some companies look at conscious capitalism in various ways and say, ‘This is a better and more effective way of doing business, we need to change.’ It’s just common sense.”

Growing sensibilities toward the new social enterprise have given rise to a new legal description for corporations, called the B Corporation.

“B Corps are a new type of corporation to use the power of business to help solve social and environmental problems,” says Katie Kerr, of B Lab, a group that certifies and supports B corporations. “Government and nonprofits are great,” says Kerr. “But if we can take the power of business to create more positive impact, we can create better communities, create better environments, and become a stronger positive force.”

The very first B corporation was founded in 2007. Today, there are over 600 B corporations accounting for revenues of over $4 billion in 13 countries around the world.

B corporations wanting to be certified must follow specific guidelines in terms of governance, its workers (every stakeholders gets a vote not just stockholders), the community, the environment, and it must be a beneficial business model that gives back.

“Ultimately we want to create a new sector of the economy,” says Kerr. “These companies are working together to be not just the best in the world, but the best for the world.”

This in itself, of course, is not a new idea. The Social Venture Network, which celebrates its 25th anniversary this year, is at least one organization founded on the notion of supporting entrepreneurs who want to create a values-driven and sustainable world.

“Our main purpose is to convene, inspire, and promote people who are mission-driven entrepreneurs,” says Social Venture Network executive director Deb Nelson. Some of the organization’s most recognizable members include The Body Shop, Ben & Jerry’s, Clif Bar, Odwalla, Tom’s of Maine, Birkenstock, Seventh Generation, Stonyfield Farm, and Eileen Fisher.

“Over the course of the past 25 years, our organization has helped these people go mainstream,” says Nelson. “It’s gone from being a radical idea, to today when they’re considered visionaries.”

But the trail to socially responsible business has gotten stony into the 21st century. Today, it’s not about creating better food snacks, clothing, and toiletries, but about the daunting social and political issues of global poverty and climate change.

“Both serve as wake-up calls for the next generation,” says Nelson. “The next generation really gets this—and in a way we didn’t get it 25 years ago. They understand that being a conscious business leader means leading in a conscious way—not just environmentally but also being conscious of social and economic justice issues. And understanding that it takes a lot of diverse perspectives to tackle the big problems we’re facing.”

Dev Aujla, co-author of the book Making Good, echoes this, but from the perspective of youth. “We’re a lucky generation living at a lucky time,” he says. “We have a movement mentality, and we understand we have to work together. Nobody has that much experience and if you have skills and if you understand the mission, you can really rethink, redesign, rebuild everything.”

Aujla finds himself talking to thousands of young people a year looking for the opportunity to help companies consider doing good. “What I see is that more and more companies are getting it,” he says. “You can look at any category and find at least one company that is making a success at doing good.”

For some, it’s about changing the scale of possibilities for doing good. At the age of 79, Paul Polak is founder of Windhorse International and International Development Enterprises. For over 20 years, he has been working with the forty-percent of the world that lives on $2 a day. (Polak also started D-Rev: Design For The Other 90%, a public design initiative which encourages designers to develop products and ideas that will help improve the health and incomes of people living on less than $4 per day. D-Rev is based in Palo Alto, California.)

Windhorse International, which was founded in 2007, sells affordable safe drinking water to rural Indians through local kiosk owners using a simple electro-chlorination technology. “Windhorse is designed to demonstrate that big business can get involved in creating new markets serving $2 day customers, do it at scale, and make money doing it,” Polak declares from his office in Denver, Colorado, as he packs for what is possibly his 100th trip to India.

“My opinion is that in the next decade, big business will have to get involved in new markets at $2 day or suffer the same fate as General Motors,” he says. “As the new recession has demonstrated, it is difficult to survive serving the richest 10% of the world’s customers. At the same time, the world is reaching its capacity, and providing a ceiling to continuous growth. The trend of going smaller and cheaper is something that is very clear in some of the transformative changes in business over the past 50 years. The market serving $2 day customers is a virgin market, and it has huge opportunities.”

While this may sound extreme, Polak points out that the Ford Model T was the miniature version of cars designed for rich playboys, and it was much cheaper. Ford’s Model T sold for $300 rather than $3000. In fact, making the automobile available to the mass consumer, something that today we take for granted, was both Henry Ford’s great innovation and marketing coup.

(As a bit of irony, know that The Henry Ford Company that started in 1901 lasted only a year before Ford got into an argument with his bankers. When Ford left, his eponymous company was renamed the Cadillac Motor Car Company.)

Polak feels that even large multinational companies can direct their energies to the underserved. In fact, it is the multinationals that have the scale and depth of resources to open new markets.

“Who is better equipped to reach scale and depth?” he asks. “I want to create a whole new generation of multinational corporations–not that I think the existing ones are inherently good or inherently evil, but because I think the market structure has evolved. Some of the essence of what we learned over 25 years at International Development Enterprises is that many of the attempts to improve the livelihoods of poor peoples have failed. But opening markets has been successful.”

First, however, Polak feels big corporations have to reset their thinking and he uses his own experiences at Windhorse as an example. Citing contaminated drinking water as a fountain of maladies that impact lifestyle, nutrition, education, and local economies, Polak set out to create purified water for rural villages in India. Frustrated by the costs inherent in modern-day methods to purify drinking water, instead of overlaying Western technology on a local problem, Polak studied the local ecosystem.

“The process builds on first talking to customers,” advises Polak. He laughs that it’s also the second and third step. “You have to change the thinking of affordability for affordable drinking water. Cosmetic changes or small changes don’t work,” he declares. “So we changed the scale of what is possible for potable drinking water.”

Rather than using off the shelf reverse osmosis methods costing about $5000, resulting in product too expensive for the $2 a day market, Polak looked back 50 years or more to locate a purification method that uses a simple car battery. The process takes a 5% solution of salt water and electricity to produce chlorine oxidants that kill pathogens (the process is used by the military). This electro-chlorination technology costs about $200. Windhorse is now selling drinking for 4 cents for four liters, a fraction of the price for bottled water.

The challenge is to design for scale and design for market. Now that they have safe drinking water, how do they distribute it to local villages?

“One of the social enterprises happening now in India is the Water Kiosk Movement, whereby people put a water kiosk in the village,” Polak explains. “Every village has two or three shops and people minding the shops, so why not go into partnership with them?”

Locals build 3000-liter tanks next to each shop. Each shop owner fills the tank with water from his own well, then technicians on motorcycles carry the electro-chlorinator instead of the water. He or she wears a branded t-shirt as they drive from village to village, visiting six or seven villages a day (water processing takes about 45 minutes to process the water).

“We’ve been doing this now in a Beta test in 25 villages for the last seven months,” declares Polak. “You’re much better off having the water right where it’s going to be used. Process creates affordability. Scale creates affordability.”

Today, Polak has a branded, distributed product. Spring Health Water (India) Ltd., the local subsidiary of Polak’s Windhorse International, sells affordable safe drinking water to rural Indians. Spring Health aims to reach at least 100 million customers who live on less than $2 a day, within ten years.

“I started with the idea of bringing practical solutions to global poverty,” explains Polak. “Now it’s becoming increasingly clear that there are these new market opportunities which are hugely profitable if you can do it to scale. These are virgin markets. I think it is a huge opportunity.”

“‘Doing good’ used to be a luxury good,” admits Dev Aujla. “I’m seeing that even big companies know that things are changing. Even oil and gas companies are investing in sun and wind energy and people are rethinking and redesigning the way the world is. Not only are these companies growing, but they’re finding investors.”

Back to Jeff Klein. “The younger generation require that their work and their businesses align with their values, and their values call for sustainable growth that considers people and planet. They have no problem with wealth, and they see no reason why financial wealth cannot co-exist with ecological integrity and serving the greater good.”

“The young people have just as much to share in developing social responsibility. In fact, some of them know better than we do,” adds Deb Nelson of Social Venture Network. “They teach us. How do we cross-pollinate to attract the best and the brightest, and help them with their enterprises and also get them to collaborate? We have to be more collaborative, more deliberate, with less of a ‘us versus them’ mentality.”

The conference coming up in Austin, Texas will be a networking and learning session for entrepreneurs running bottom line companies where both the social mission and profit mission are aligned. Can companies solve social and environmental problems? Can corporate America collaborate and contribute to a just and sustainable world?

As Billy Parish and Dev Aujla point out in their book Making Good, it all boils down to a simple word. Empathy.

“People like to be around people who care about people,” echoes Klein. And if that’s true, the Conscious Capitalism CEO Summit should be a good crowd.